Land Tax frustrations

The land tax brackets for most states has not changed for several years but the land value has been forever increasing in suburbs with capital growth, which is great. But, at the same time, the rent has likely not changed by much. This means that every year the yield decreases unless one throws in more cash.

In today's environment, in most states, a decent piece of land will not be exempt from land tax sitting in a trust. How do people handle this going forward?

 

In NSW the threshold increases each year - in line with the CPI I think.

 

Yep, in NSW the threshold has barely moved

 

In just one year my land tax bill increased by $7k. No new purchases just values gone up. The way i see it every one wants a slice of the pie.

 

Agree, yet the land tax varies as it is a state tax.
Even though NSW has some form of CPI, in QLD nothing has changed in 17 years I have been buying there, now imagine, all my land has increased in value so now I am up the next scale!
Not only that, if you buy in trusts (they have lower threshold) you pay more for council rates, just for being an investor...
In addition if you buy a whole complex, strata titled for each unit, as a family unit, say a complex of units, you will pay aggregated stamp duty, it escalates and costs a lot!
So I suppose this is how smart government economists make us poorer, it may be similar to the concept, where assume you had a pay increase of 1%, yet inflation was 3%, hence you will be poorer by 2%, but you may feel great as you had an increase...?
I just hope that the compounding of land will surpass, and so far it does, as land tax is treated as an expense for now, hence can be claimed each year.
We cannot control the external circumstances...
Perhaps that's why some of my IPs in SMSF are bought with borrowings, hence under bare/holding trust each, having each the threshold, and any surplus I place into the offsets, no point paying off the loan as then all IPs would be added for land tax. Government is smart, they wish you to have no debts in SMSF in pension phase, yet if you hold lots of property your land lax is than accumulated and you pay more!
I had only one IP in WA and last two years had to pay land tax too!

 

Just started getting hit with land tax in NSW, so made the biggest culprit my PPOR- an apartment complex with a large footprint whose land value is on par with a regional freestanding 800sqm house. Absolutely ridiculous how much land value rises each year..

 

I remember raising this with the WA treasurer at the time.

The response was that "we desperately need more of everything and you are asking that we reduce our inputs. Which one gives out first?"

I suggest that you focus on tax strategies to reduce land tax as governments will not give you the answer to your problems (as painful as they are).

 

Yes if you have a goose that lays 3 eggs why reduce to get less eggs....
Yes, I have, bought a unit in NSW and renovated hence no land tax as yet...so diversified into other states, off-loaded the lemons, sold WA property, and invested under other entities, that's as far as I can go in residential RE.
However, it is very manipulative strategy, at least CPI of some sort could be justified? Many people complain about property investors yet they forget how much we support the government, we give quite few pieces of the pie!

 

I think we can all expect land tax to dramatically increase. It is an easy tax that is not easily avoided for existing owned properties. Property owners are rich sitting ducks. If they put it up some will sell too so that means more tax recieved on the stamp duty as well.

 

In QLD you might be planning on having 3 children and decide that it makes for an easier transition when you pass on if each of them control a trust that owns 1/3 of an individual property. An added bonus of being so forward thinking about your succession planning is that there would be 3 x the land tax threshold.

 

They probably hope you have to sell so stamp duty and capital gains tax come into play.

 

i got 15k extra this yr in nsw because land value double.

 

Save on land tax, splurge on family counselling.

 

So you've had around $1m increase averaged over the last 3 years. Either zero to hero if you've been busy buying, already had a substantial going portfolio, hit with a rezoning and suffering the benefits or wildly over taxed.

 

the reason is because next few block was sold to a developer with massive premium, (as it was rezoned to build 15m height apartment), but i don't see the benefits as i am not selling.

 

As a part of the state and commonwealth plans to increase affordability and put downwards pressure on investor accumulation of property its probable that land tax thresholds could be capped and /or rates enhanced for some owners in the future.

We have already seen their reaction to limit foreign buyers with hefty duties and land tax surcharges in some states.

I have long feared QLD land tax could be bought into line with other states. ie trusts with a single threshold etc.

 

Less counselling needs because each child can take over a separate trust with no needs for arguments that could happen when control passed to 2 or more people

 

Spot on.

Besides, your dead by that stage and the kids can fight it out amongst themselves.

 

Agree, have that structured that way, but the key is must pass on....both of us.
What about if current IPs are in trust, can the control be passed say when the children are 18 now, hence split say between 2 adult children to minimise land tax?

 

Control can be passed to the children while you are alive. But if there is one trust and you want to split it so that there are 2 then this is possible but you will need good advice on the CGT and stamp duty aspects.